Pension Calculator
FinanceCalculate an estimated annual pension benefit based on years of service, accrual rate, and final average salary.
Estimated Annual Pension
Estimated annual pension benefit, using a standard defined-benefit formula: years of service times accrual rate times final average salary.
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Frequently Asked Questions
What is final average salary?
Final average salary typically refers to the average of an employee highest-earning years, often the final 3 to 5 years of employment, used as the salary basis in most defined-benefit pension formulas.
What is a typical accrual rate?
Accrual rates commonly range from 1 to 2.5 percent per year of service, depending on the specific pension plan, with public sector pensions sometimes offering higher accrual rates than private sector plans.
Is this calculation applicable to defined-contribution plans like a 401k?
No, this formula applies specifically to defined-benefit pension plans, which promise a specific calculated benefit. Defined-contribution plans like a 401k instead depend on actual account balance and investment performance, not a service-based formula.
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